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3232Identifying Maintenance & Support Costs for Business Applicationshttp://e2btek.com/identifying-maintenance-support-costs-business-applications/?utm_source=rss&utm_medium=rss&utm_campaign=identifying-maintenance-support-costs-business-applications
Fri, 16 Mar 2018 18:33:10 +0000http://e2btek.com/?p=6242The costs for maintaining and supporting your business software may be enough to justify a move to a new application. Many older products are kept on life support by the vendor but they are not receiving significant research and development investment in new features putting a burden on the user to make those investments in

]]>The costs for maintaining and supporting your business software may be enough to justify a move to a new application. Many older products are kept on life support by the vendor but they are not receiving significant research and development investment in new features putting a burden on the user to make those investments in customizations and integration to fill out the gaps.

Further, the costs for maintenance and support of a business system go well beyond the simple contract costs for contracts with the vendor or your support agency. Rather, they also include the cost (or a portion of the cost) of internal IT resources and other users who are called upon to apply updates, troubleshoot issues, or re-enter lost data. Consider for a moment a modest 10% cost savings in lost labor by switching to a system that requires less maintenance and support. If you’re paying an IT resource $100,000 annually then you’re saving at least $10,000 and likely a lot more because there are certainly efficiencies to be gained by other employees and users as well.

One of the major costs for maintaining software is directly related to upgrades – especially upgrades that include customizations. We know this because it’s something we do all the time for our customers. Let’s take a step back for a moment – there’s a time and place for customizations but there’s also a right and wrong way to customize software.

A minor update to your business software without modifications can take a little as an hour (or less in some circumstances). Most annual upgrades take a few hours to a day since it’s best practice to upgrade a separate test environment before proceeding on your live system. Major upgrades typically come every 5 to 10 years and reflect a major shift in technology or functionality from the publisher. These may require much more investment in time or money to upgrade to the latest release and in some cases, could mean that you’re re-implementing specific components of the software from scratch.

Costs to upgrade moderately or heavily customized applications will be dramatically higher as the company that performed the customizations (or your internally modified code) should not only be upgraded but also tested thoroughly prior to the live upgrade. Upgrades for customizations we’ve performed through the years for moderately modified systems have averaged about $5,000 to $10,000 for a major upgrade. For heavily modified systems we’ve seen costs upwards of $20,000 for a major upgrade. As a general rule, the cost to maintain customizations are approximately 20% to 30% of the original project cost for each upgrade. As such, a customization that cost $10,000 will cost about $2,000 to $3,000 to maintain for each major upgrade.

It should be relatively easy to identify upgrade costs if you’re using an outside firm to manage upgrades or if you’re recording your time against upgrades in a project system. Either way, you should definitely understand the maintenance costs associated with on-going service to your business systems.

Companies that switch from premise-based systems to hosted applications may see a significant decrease in maintenance and support costs. There is inherently a large investment in upgrades that require staff or outsource resources to install and test new releases and to ensure that custom code is compatible with the latest changes made by the software vendor. Conversely, most hosted business applications do not require installation. Rather, the vendor applies the updates automatically and support costs are minimal since they are typically included in the annual subscription and support is much easier because the vendor (with permission) has direct access to your application and database without having to rely on your staff to setup a connection, to share their screens during a support session, or to upload a database to the vendor’s support department for troubleshooting.

HOW TECHNOLOGY SHIFTS AFFECT BUSINESS APPLICATIONS

When’s the right time to replace your software to take advantage of the next technology shift? Read more.

]]>Compliance & Legal Impact on Business Softwarehttp://e2btek.com/compliance-legal-impact-business-software/?utm_source=rss&utm_medium=rss&utm_campaign=compliance-legal-impact-business-software
Thu, 15 Mar 2018 20:12:32 +0000http://e2btek.com/?p=6236We’ve seen companies get in a lot of trouble by failing to understand how their business software can keep them in compliance with federal and industry mandates and we’ve seen firsthand how business applications can expose companies legally to expensive litigation. Some compliance mandates relate only to larger companies, such as Sarbanes-Oxley financial reporting requirements

]]>We’ve seen companies get in a lot of trouble by failing to understand how their business software can keep them in compliance with federal and industry mandates and we’ve seen firsthand how business applications can expose companies legally to expensive litigation.

Some compliance mandates relate only to larger companies, such as Sarbanes-Oxley financial reporting requirements but there are compliance requirements for small companies as well. We often don’t think about all of them but here’s a short list: FDA nutritional labeling, allergens, and recall management; FAA aircraft maintenance and repair records and safety plans; OSHA, FMLA, FLSA, and other labor regulations; drug-free workplace initiatives; ISO quality control procedures and documentation; HIPAA employee human resource confidentiality; 21 CFR Part 11 compliance for medical device manufacturers; CAN-SPAM Act for email marketing; Affordable Care Act (aka Obamacare), IRS sales tax and revenue reporting compliance, and a whole lot more.

Did you know that there are more than 60 federal agencies that issue about 4,000 new federal regulations every year? And this is in addition to regulations that are already on the books and those that are modified or adapted every year. In fact, the rules in the Code of Federal Regulations (CFR) have grown to more than 130,000 pages? Do you have time to read all of that and to understand what impact these rules and regulations have on your business? Do you realize that non-compliance can result in a warning or slap on the wrist or could result in thousands of dollars in fines or imprisonment?

Compliance mandates will also come from your customers and vendors. For example, you may be required to conduct business with vendors via electronic data interchange (EDI) with standards or you may be required to provide certificates of analysis (COA) for products provided to certain customers. You may also be required to maintain ISO or other accreditations just to do business with certain industries or customers.

It is probably impossible for you to understand the legal ramifications that could result from being on the wrong business application but you probably won’t know until it happens to you. Just imagine the worst-case scenarios: a food manufacturer can’t trace an issue to a specific lot – they must recall everything costing thousands or face an onslaught of legal cases from consumers who are sick or die from consuming the product. Or an aircraft maintenance and report station is sued for using a torque wrench that is out of calibration on an aircraft engine which crashes, killing everyone aboard. Or a medical firm is hacked and confidential patient information is lost resulting in thousands of lawsuits. Compliance and legal requirements on businesses is greater than it ever has been and it’s only going to get harder to remain in compliance.

Your business software can make your life easier or worse. Many larger software publishers hire employees to specifically monitor changes to federal regulations so that their users remain in compliance. Take for example a developer of sales tax software which provides updates for federal, state, and local sales tax laws.

It’s easy to justify switching to a new business system if you’re spending a lot of money to remain in compliance, you’re constantly hit with fees and fines for non-compliance, or you spend a lot of money defending yourself in court.

It may be time to replace your business software if you find that you are not able to get reports or data out of the software required for compliance reporting or if you are not confident in data security or accuracy related to compliance mandates. It may also be time to consider changing if you’ve been hit with (or threatened with) a lawsuit related to a compliance issue or if you are continually fined by government regulators, customers, or vendors for failing to remain in compliance. And it should become apparent that your current business system is failing you if are continually having to work outside of it to remain in compliance.

It’s probably impossible to quantify the cost savings for compliance and legal since much of this lies in unknown risk but there may be cases where you can put some real numbers to this area by estimating a percentage reduction in your overall compliance and/or legal costs annually.

COMPLY WITH ASC 606 AND IFRS 15

]]>How Technology Shifts Affect Business Applicationshttp://e2btek.com/technology-shifts-affect-business-applications/?utm_source=rss&utm_medium=rss&utm_campaign=technology-shifts-affect-business-applications
Thu, 15 Mar 2018 19:51:41 +0000http://e2btek.com/?p=6232Greek philosopher Heraclitus said, “Everything changes and nothing remains still.” He definitely could have been talking about technology with that statement. Consider that businesses used paper and manual processes before computers were introduced in the 1960s. Businesses adopted mainframe computers in the 1970s and we witnessed the birth of the personal computer (or microcomputer) in

]]>Greek philosopher Heraclitus said, “Everything changes and nothing remains still.” He definitely could have been talking about technology with that statement. Consider that businesses used paper and manual processes before computers were introduced in the 1960s. Businesses adopted mainframe computers in the 1970s and we witnessed the birth of the personal computer (or microcomputer) in the 1980s. We’ve seen operating systems change from Unix to Windows and databases from proprietary platforms to SQL. And we’re currently in the transition from the desktop to the cloud. Yes, technology changes and it changes dramatically about every ten years. Consider how the Internet changed business needs and how cell phones and mobility continue to change the needs of our businesses today.

If you purchased your business software more than ten years ago it is very likely that you are on older technology. The advantage is that older technology is much more stable and likely has a lot more features. The downside to older technology is that it can become costlier to maintain and more difficult to integrate with some of the newer technologies available on the market today.

In a worst-case scenario – you could be using software that runs on unsupported technology that can, and eventually will, cease to function properly. This can pose serious risk to your business if you are unable to access historical data for analysis or compliance or if you cannot conduct business if your system goes down and no one knows how to fix the problem. Some very old applications are also reliant on specific hardware platforms that may be discontinued. Consider some of the popular applications used in the 1980s and 1990s that ran exclusively on the HP3000 platform which HP discontinued a few years ago. Granted, another company stepped up to continue making parts for the hardware platform but do you really want to run your business on a platform that is one step away from becoming extinct?

Technology is vital not just for the inside of your organization but also for everything your business touches – your customers, your vendors, investors, and your partners. It can make it easier to communicate and collaborate with the outside world or it can severely hinder your ability to meet the needs of people outside your four walls. Customers are demanding more and more visibility into projects, jobs, orders, and inventory availability than ever before. Vendors are demanding more access to your data to improve their internal forecasting and planning. And everyone involved in the supply chain expects that they can use technology to collaborate better and to self-serve without human interaction.

Fail to keep up with technology and you will eventually lose to competitors who can provide a better experience for customers and vendors alike. Stay at the front of technology and you can use that as a competitive weapon to win more business, retain customers, and lower your costs.

Technology can be very difficult to evaluate. Sometimes (often) it’s a matter of personal preference and experience. If you have an IT staff that is proficient on a database or operating system then it’s unlikely that they will want to move to something else. People are naturally resistant to change. Further, moving to a new technology platform could jeopardize their job – they may not have the skillset to learn something new or a move to a hosted platform may make their job obsolete as the vendor may provide the hosting, maintenance, and support that they were hired to perform for you.

There’s an old saying – There’s more than one way to skin a cat. And there certainly are more than one technology platforms and technology approaches that will provide the same results. If you’re not technically inclined then you should consult with a technology firm to do an assessment of your current system. Make sure that you find a firm that has a great reputation and stays at the forefront of technology with as little bias as possible to technology platforms. A good place to start is by asking your accounting firm for references. They work across a lot of different companies and will probably know which IT companies are best to perform an unbiased assessment and some of the larger accounting firms provide IT assessments themselves.

Some larger software publishers like Sage, Microsoft, Epicor, and others do invest considerable research and development to move their products to new technologies. Sage 100cloud has moved from a proprietary database to Microsoft SQL. Microsoft recently introduced Microsoft Dynamics 365 moving its core ERP platforms to the cloud. And Epicor completely re-wrote Epicor ERP on Microsoft technologies to replace decades-old Progress code. Conversely, most smaller software vendors lack the customer base and revenue to cost-justify major investments in the core technology and will likely never make the leap to newer platforms. Others may make the move from one platform to another but at a cost as they port or adapt their applications to work with the newer technologies without rewriting them to optimize the new features available inside of them.

When’s the right time to replace your software to take advantage of the next technology shift? Never. It’s never a good time or the right time to base your decision to move on what’s available or what’s coming in the next few years as technology constantly changes and there’s no way to know for sure what’s coming next. With that said, companies on older technology platforms (10+ years old) should understand what they’re missing in today’s technologies and how that could impact their business.

It’s very difficult to identify technology costs but you may start by documenting the costs for your current technology licenses – operating systems, databases, servers, etc. and getting a quote for newer technologies in these areas. Consider that in a SaaS environment these costs are often eliminated completely as they are rolled into the overall cost of the hosted cloud application. Also consider how much you spend today on employee salaries or third-party technology services to maintain, upgrade, and support your existing technologies. In some cases these costs can be eliminated if you move to the cloud as the vendor takes on the responsibility for maintaining servers and most SaaS systems are updated automatically or at least by request with no additional cost to your organization.

SHOULD YOU REPLACE YOUR ERP ACCOUNTING SOFTWARE?

When is the right time to switch software and what are the tell-tale signs that the time is now and not later? Read the entire article here.